The University of Louisville men’s and women’s basketball programs are among the most prominent in the nation, but to attract NCAA tournament games and other high-profile events, the university needed a new facility.
In 2006, the Kentucky Governor’s office established the Louisville Arena Authority (LAA) to study options for a new home for the men’s and women’s teams. The state, the city and the university ultimately sought a downtown location for the arena, providing an opportunity for economic growth in the city through tourism, nightlife and shopping. Due to its significant expertise securing financing for major capital projects and sports facilities in particular—especially in cases where financing was complex—Goldman Sachs was selected to manage the financing for the facility.
The $349 million facility, with funding structured by Goldman Sachs and LAA, created thousands of construction jobs, as well as longer-term employment and economic development in downtown Louisville.
To service the bonds needed for construction, Goldman Sachs and LAA built a plan around three revenue sources. The Commonwealth of Kentucky committed incremental tax revenues; the City of Louisville committed to regular payments; and additional funds were projected to come from ticket sales, concessions, advertising and other revenue streams generated by the arena.
Typically, financing a college sports facility of this size is fully supported by revenues from a university or municipality. In this case, the financing structure was dependent on several different revenue sources, each with its own characteristics regarding timing, amount and how the money could be spent. In addition to up-front public funds, the plan also relied on future income provided by projected arena revenues and increased tax revenues resulting from the revitalization of the downtown area.
Goldman Sachs helped LAA develop this unique financing structure which was designed to enable the organization to meet its obligations, even under stress. Such efforts were critical to reassuring investors that the project would be completed on time and on budget and that the ongoing arena revenue would meet initial forecasts. Ultimately, Goldman Sachs helped LAA helped raise the money needed to begin construction in time to open the arena for the 2010-2011 basketball season.
Local Workers, Local Impact
An important aspect of the arena project was ensuring that minorities, women and local workers from Kentucky and southern Indiana were involved in its construction. The participation goals were reached or exceeded in all cases.
LAA engaged this diverse workforce by partnering with local stakeholders to establish the Construction Pipeline Project, a program designed to train local workers in construction and related trades, thus opening the door to new careers for local residents.
The 22,000-seat arena, known as the KFC Yum! Center, opened on October 10, 2010. It now hosts collegiate sporting events, concerts and family-friendly shows, creating a year-round rotation of downtown entertainment. By enhancing tourism, the arena has brought new hotel and restaurant business to an underutilized area of downtown.